amitabhprasad wrote:I think the confusion is between "B" and "C" rest all choices are ruled out.

B) to set dividends more conservatively than they have been
In "B" referent of they can be either "dividends" or "automakers". If you try replacing they either of the choices make sense.

C) to be more conservative than they have been in setting dividends.
By stating dividends explicitly this referent issue is taken care of

nothing to do with "stating dividends explicitly", since the word "dividends" is also present in choice (b).

the difference is that, in choice (c), "dividends" comes AFTER "they", so it's clearly not the antecedent.

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still:

be EXTREMELY CAUTIOUS about eliminating choices with "ambiguous pronouns".

there are plenty of official problems whose correct answers contain "ambiguous" pronouns. for two examples, see #19 in the purple OG verbal supplement and #6 in the 12th edition OG.

of course, those two problems contain genuinely ambiguous pronouns in ALL of their answer choices. i don't think the gmat would make you pick a correct answer containing an ambiguous pronoun over an incorrect answer with a non-ambiguous pronoun, but i suppose you never know.

takeaway:
always use pronoun ambiguity AFTER all other grammatical concerns.

tom4lax wrote:So just as a follow-up here, the reason answer B is incorrect is because of the usage of "conservatively"?

nope. "conservatively" is fine. that's an adverb, and it's being used as an adverb. no problem there at all.

in choice (c), "conservative" is used as an adverb, as it should be. again, all is well.

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the real problem with choice (b) is the lack of parallelism. you have "they have been", but there's no form of TO BE to which it can be parallel. (contrast this with choice (c), in which there is such a form of "to be" that anchors the parallelism.)

the gmat would not eliminate something like (b) solely on the basis of "ambiguous pronoun".
there are plenty of official problems in which a certain degree of pronoun ambiguity is tolerated (see, for instance, #19 in the OG verbal supplement), so pronoun ambiguity problems should be strictly a last resort (i.e., if all other elimination methods fail).